Regal Entertainment Explores Possible Sale

UPDATE, 2:19 PM: Wall Street analysts were largely unsuccessful in their efforts to get Regal execs to help investors understand the company’s possible sale – what some referred to as “the elephant in the room.” CEO Amy Miles didn’t rule out the possibility that her company might buy some theaters while it decides its larger strategy. But she didn’t say whether she thought Regal would have a problem merging with other exhibition powers such as AMC and Cinemark. Nor did she share her thoughts about Hollywood’s possible reaction to today’s announcement.

The CEO did say, though, that Regal will not change its mind about its refusal to run Crouching Tiger, Hidden Dragon: The Green Legend on its IMAX screens next year because the film will simultaneously appear on Netflix. Although the chain typically collaborates with IMAX in deciding what releases appear on large screens, Regal “clearly felt comfortable” in nixing the film because the day-and-date release “violated one of our policies.”

PREVIOUS, 1:14 PM: Shares in the No. 1 exhibition chain are up nearly 15% in initial post-market trading after it made this startling disclosure, and announced a special cash dividend, as part of its Q3 earnings release. Regal says that it has hired Morgan Stanley to act as financial advisor after the board authorized “the exploration of strategic alternatives to enhance shareholder value, which may include a potential sale of the Company.” The company statement adds that the board “has great confidence in the Company’s management team and its strategic plan.” But its “strong performance and attractive industry dynamics” makes this a good time to “conduct a thorough review of options.”

CEO Amy Miles told analysts that she won’t provide additional information about the plans, or provide regular updates, and that there’s no guarantee that a sale will take place.

“Commitment to delivering shareholder value has been the cornerstone of our strategy for many years and we believe today’s announcement along with the declaration of our 6th special dividend clearly demonstrate that commitment,” she says. She adds that the company is “optimistic regarding the potential for box office success during the upcoming holiday season and through 2015.”

Regal’s eager to please shareholders. It says that it will offer a $1 per share special cash dividend  in mid-December, in addition to the quarterly 22 cents per share dividend – which it says it intends to pay “for the foreseeable future.”

That seems to have overshadowed the lackluster financial performance in Q3. Regal reported net income of $24.6 million, down 64.5% from the period last year, on revenues of $693.8 million, down 14.7%. The top line was short of the $724.14 million that analysts expected. Earnings at 17 cents per share matched the consensus forecast.

Admissions revenue fell 15.9% to $461.1 million, as the number of tickets sold fell 18.6% to 50.8 million. The average outlay per ticket increased 3.2% to $9.07. Concessions were down 13.2% to $194.5 million as the average outlay per patron increased 6.7% to $3.83.

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